This research focuses on improving the income of the independent smallholders. Based on feedbacks from smallholders, several potential business models are explored and set-up. These actual business ventures are directly managed by the farmers themselves. Then, these business models are measured in its ability to improve the smallholders’ household income and at the same time reducing their poverty level. To enhance the skills of the smallholders, related projects are also undertaken in the aspects of entrepreneurship, financial literacy and supply chain.
Palm oil production in Malaysia is increasingly under pressure due to the global demand for sustainable palm oil. Palm oil cultivation has been identified as a cause of significant reduction in the area of tropical forests, soil erosion, the impact of global warming, air pollution and water pollution. In addition, emission of palm oil industry in factories and transportation materials of palm oil products has also been identified as another source of pollution.
Addressing the challenges and problems is complicated because the source of these problems are at different levels in the value chain the palm oil inddustry. For example, different location and conditions bring different challenges. In addition, the absence of formal institutions to control palm oil production and sustainable trade is an issue that is critical. Furthermore, Palm farmers’ smallholder control over their production method is also difficult to monitor.
An initiative to fill this gap was through the creation of Rountable of Sustainable Palm Oil (RSPO) in 2004 by the international private sector companies and NGOs. However, the effectiveness and validity of the RSPO in reducing the effects of social and environmental negative consequence of agricultural industry are increasingly being questioned. The issues associated between high cost of sustainability has driven small holders in many areas away from the movement. Thus the value chain of the palm oil demands a business model that can assure them good returns and at the same time can match the requirement of the mother nature.
Social business model is a form of business that used to social and environmental sustainability in achieving the establishment while at the same time giving profits to the adopters. The suitability in applying the social business model in the value chain is believed can contribute to the economy of smallholders and sustainable value chain for Palm. This has been proven with the success of this model, in several countries in Africa and also in Asia.
Matching the palm oil value chain and the application of the social business model in different level of the value chain can be the means towards achieving the sustainable objective of the palm oil value chain especially at the location of the main source i.e. the small holders.